Our View: Illinois lawmakers must debate taxes, spending policies

Mike Madigan's plan to cut Illinois' corporate tax rate has been greeted with cheers, disbelief and "what the heck is he really up to?"

But regardless of the House speaker's intentions, Illinois must have a conversation about how it taxes and how it spends.

Madigan announced his idea a week ago. He wants to cut the Illinois corporate tax rate from 7 percent to 3.5 percent, a move he said would cost the state $1.5 billion.

Even without that cut, the state is expected to see a $1.58 billion drop in revenue if the state's individual income tax increase rolls back as planned.

Tax relief is welcome, but what's going to be cut to make up for the money that won't be coming in? What services will be lost? The state is woefully behind in paying its bills - more than $4.7 billion as of Wednesday. And Gov. Pat Quinn talked about a lot of new initiatives in his State of the State address that we wonder how he's going to pay for.

Madigan hopes the tax cut will improve the state's business climate, boost economic development and create jobs. Creating jobs would strengthen the state's tax base, but it's not going to happen overnight. What will be sacrificed in the meantime?

There's no question that Illinois needs to be more aggressive in its economic policies. Illinois has the third-worst unemployment rate in the nation and projects to have the worst job growth in the U.S. this year.

Madigan's plan could be a good first step, but small businesses create a lot of jobs and wouldn't get the tax break he advocates. They pay the individual income tax rate and deserve relief - otherwise, Madigan's plan would merely switch the burden from one business sector to another.

Taxes should be the talk of Springfield this legislative season, which makes those up for re-election nervous. Lawmakers need to decide what to do with 2011's "temporary" tax increase. They could allow it to expire or they could vote to make it permanent.

Also on the agenda is a "progressive," or graduated, income tax. Under one proposal, the rates range from 3 percent for those who earn $18,000 or less to 9 percent for those who earn more than $500,000. Those rates probably will change as the measure is debated this year.

Proponents will say it's a matter of fairness, that people who make more money should pay more. Of the 41 states that have an individual income tax, 34 have a graduated rate structure.

One oft-neglected point in the conversation about the graduated/progressive tax plan: It requires amending the Illinois Constitution, which means voters would have to buy into it. Legislators will do what they do, but unless voters give it the OK, it's not going to happen.

Then there's the question about how Illinois is going to pay to fix its crumbling roads. The Transportation for Illinois Coalition proposes abolishing the state motor fuel tax and replacing it with a 9.5 percent wholesale fuel tax tied to the price of gasoline. That proposal has yet to receive much support.

Another tax issue has surfaced during the debates among the Republican candidates for governor. Three of the candidates - Kirk Dillard, Bill Brady and Bruce Rauner - said they would consider broadening the sales tax to include services such as hair cuts as part of an overall tax strategy.

Rod Blagojevich proposed a sales tax on services in 2003. You know how far that went.

It's important to note that if Madigan wants it done, it gets done. If he doesn't like a bill, he'll sit on it and let it die. Legislation he advocates, such as pension reform, gets voted on and passed.

Regardless of individual proposals, Illinois must take a comprehensive look at its tax structure. The current system isn't working for businesses, individuals or the agencies that expect payment for services rendered on behalf of the state.